Visium Asset Management

Visium Asset Management LP was an American multi-strategy hedge fund that began as a healthcare-focused hedge fund, founded by Jacob Gottlieb in 2005. Visium managed several investment funds, with about $8 billion of assets under management and 170 employees at its peak in 2016. That year three of the company's traders were indicted by United States federal authorities for securities fraud. One of the accused employees killed himself days after he was indicted. Visium subsequently liquidated several of its funds, and wound down operations.

Visium Asset Management LP
TypePrivate
IndustryInvestment management
Founded2005
FounderJacob Gottlieb
HeadquartersNew York City, New York, U.S.
ProductsHedge funds
AUM$8 billion (2016)
Number of employees
170 (2016)

Jacob Gottlieb

Jacob Gottlieb was born in Brooklyn, New York, around 1971–1972.[1][2] He graduated with a Bachelor of Arts in economics from Brown University and went on to receive an M.D. from New York University School of Medicine.[3] While originally seeking to become a surgeon, according to Gottlieb, he decided instead to work on Wall Street after graduating college.[3]

Having previously managed healthcare related portfolios for several investment companies, Jacob Gottlieb started Visium Asset Management LP in 2005.[3][4] Initially starting with Visium Balanced Fund, Gottlieb would explain in a 2012 interview with Institutional Investor that he hoped to have the company later offer enough diversified products to eventually challenge the largest hedge fund managers in the industry.[1][5]

In 2018, he would begin another firm known as Altium Capital as its first CEO.[6] A 2019 article by The Wall Street Journal reported Gottlieb hired reputation management company Status Labs to challenge negative news coverage about him and Visium while also helping him raise money for Altium Capital.[7]

Business

Funds

Visium Asset Management oversaw numerous funds throughout its existence. In 2015, Visium "managed five hedge funds and a mutual fund" while also reportedly trying to raise $500 million in capital for the creation of a private equity fund, according to Bloomberg News.[8] At the company's most successful point in 2016, they had at least $8 billion in assets under management.[2][9]

Name Start End Fate Notes Ref.
Visium Balanced Fund 2005 2016 Liquidated[lower-alpha 1] The firm's flagship healthcare equity fund. It would later serve as a model for Altium Capital. [2][6]
Visium Global Fund 2009 2016 Sold Bought by AllianceBernstein. [9]
Visium Institutional Partners Fund 2016 Liquidated [9][10]
Visium Equity Alpha Fund 2016 Liquidated [9][10]
Visium Equity Alpha UCITS Fund 2015 2016 Liquidated A diversified United States-focused equity fund with long and short positions. [9][11]
Visium Credit Opportunities Fund 2009 2013 Liquidated Investigated in March 2016 over valuation of securities. [12][13]
Visium Event Driven Fund 2013 2015 Liquidated [12][14]

Conflicts of interest

Visium Asset Management started as a family business. Until 2010, Gottlieb's father had a desk within the firm's New York office and, on occasion, informally advised the company on accounting matters.[2] In 2009, Jacob Gottlieb hired his brother Mark as chief compliance officer in a move regarded by Bloomberg News as a "potential conflict of interest". Additionally, Bloomberg reported that portfolio manager Stefan Lumiere "was hired in 2007, two years after his sister Alexandra became engaged to [Jacob] Gottlieb."[2]

Despite his public commitment to "the highest ethical conduct [for Visium employees]", Gottlieb directly owned 25,703 shares of Intercept Pharmaceuticals despite the company having 5.2% stake as well. This caused at least one investor complaint, and the company received accusations of double standards from several employees.[2]

Winding down and closure

Investigation for fraud

A former junior trader with the firm, Jason Thorell, told the U.S. Securities and Exchange Commission in 2013, according to Reuters, that "Visium employees routinely sought sham quotes from brokers to justify inflated values for debt securities, and deviated from prices set by third-parties on a magnitude beyond what was usual."[15] With the hope of receiving a payout under the SEC’s whistleblower program which can award whistleblowers up to 30% of any money the SEC collects in a matter, Thorell cooperated with federal investigators and secretly recorded over 200 hours of conversations over two years with individuals at the firm.[5][15][16][17]

In March 2016, Visium notified shareholders that Visium was being investigated by the United States Justice Department and the SEC regarding the company's actions in regard to their Credit Opportunities Fund which had been shut down in 2013.[12] The investigation led to large customer withdrawals.[18] Later in June, three traders at the firm were charged with securities fraud.[2][19] Sanjay Valvani and Chris Plaford were indicted for insider trading while Plaford and Stefan Lumiere were accused of inflating the value of the Credit Opportunities Fund.[9]

Suicide of Sanjay Valvani

On June 20, 2016, former company partner Sanjay Valvani was found dead in an apparent suicide.[20] Valvani was among those charged with insider trading by then prosecutor Preet Bharara.[21] While managing the firm's flagship healthcare fund,[2] according to federal authorities, "Valvani specifically made about $25 million by trading on non-public information about pending drug approvals from the Food and Drug Administration".[lower-alpha 2][20]

Valvani pleaded not guilty to the charges against him five days before he took his own life.[2] Vivani worked for the company since its inception in 2005 and reportedly managed as much as $2 billion in funds. Due to his death, the court case against him had to be dropped.[21]

In 2019, Visium filed a complaint against Sanjay Valvani's widow and estate seeking over $100 million be returned,[lower-alpha 3] due to Valvani's alleged illegal conduct and breach of fiduciary duty.[22]

United States v. Lumiere

Two years after his sister's 2005 marriage to Gottlieb, Stefan Lumiere joined Visium to manage the firm's Credit Opportunities Fund which held assets consisting of distressed debt.[5] Upon being accused of fraudulently overvaluing the assets of the fund, he denied any wrongdoing as well as the accuracy of the government's statements against him.[2] However, Lumiere was ultimately convicted of securities fraud after his case went to trial.[7]

Liquidation

In the wake of the controversy, Jacob Gottlieb became tasked with winding down the company he originally founded.[6][10] Following the end of negotiations with the Securities and Exchange Commission in 2018, the company forfeited $10 million to regulators in exchange for being able to close the firm.[23][24] The firm began liquidation two years earlier selling its primary investment fund to AllianceBernstein.[25]

As of August 19, 2019, the firm was operating under the name VA Management LP.[22]

Notes
  1. 3–5% of the fund was held back for potential payment of the firm's liabilities.
  2. Bloomberg News reported a $32 million figure from federal authorities.[20][21]
  3. The company was specifically requesting a return of payments they previously made to Valvani for work between 2007 and 2016.

Sources
  1. Rose-Smith, Imogen (August 7, 2012). "Visium's Founder in Major Makeover". Institutional Investor. Retrieved December 28, 2019.
  2. Foxman, Simone; Porzecanski, Katia; Burton, Katherine (July 20, 2016). "Inside the High-Profile Downfall of a $8 Billion Hedge Fund". Bloomberg News. Retrieved December 23, 2019.
  3. "About". Jacob Gottlieb. Retrieved December 27, 2019.
  4. "Visium Asset Management: The Fall of a Hedge Fund and What It Means for Jacob Gottlieb". MarketWatch (Press release). Finance News Wire. May 8, 2018. Retrieved December 23, 2019.
  5. Berthelsen, Christian (January 9, 2017). "Visium Star Witness Taped Gottlieb While Working Undercover". Bloomberg News. Retrieved December 28, 2019.
  6. Levy, Rachael (September 7, 2018). "Founder of Hedge Fund Snared In Scandal Plots a Return". Wall Street Journal. Dow Jones & Company. Retrieved December 24, 2019 – via ProQuest.
  7. Levy, Rachael (December 13, 2019). "How the 1% Scrubs Its Image Online". Wall Street Journal. Dow Jones & Company. Retrieved December 23, 2019 – via ProQuest.
  8. Porzecanski, Katia; Parmar, Hema (July 19, 2016). "Visium Asset Management to Fire 33 People as Funds Shutter". Bloomberg News. Retrieved December 27, 2019.
  9. Foxman, Simone; Porzecanski, Katia (June 17, 2016). "Visium to Shut Four Remaining Hedge Funds as Manager Charged". Bloomberg News. Retrieved December 27, 2019.
  10. Stevenson, Alexandra (June 17, 2016). "Visium to Sell and Liquidate Funds After Insider Trading Charges". The New York Times. Retrieved December 27, 2019.
  11. "Visium Asset Management Launches Long/Short U.S. Equities UCITS Fund". Business Wire (Press release). New York. May 5, 2015. Retrieved December 27, 2019.
  12. Stevenson, Alexandra (March 7, 2016). "Visium Hedge Fund Being Investigated by Justice Dept. and S.E.C." The New York Times. Retrieved December 27, 2019.
  13. Porzecanski, Katia; Burton, Katherine (March 7, 2016). "Visium Being Probed by U.S. Over Valuation in Credit Fund". Bloomberg News. Retrieved December 27, 2019.
  14. "Visium Asset Management Launches its First Mutual Fund". PRNewswire (Press release). New York. August 19, 2013. Retrieved February 21, 2020.
  15. Raymond, Nate (January 12, 2017). "Ex-Visium trader tells New York jury how he turned whistleblower". Reuters. New York. Retrieved December 24, 2019.
  16. "Visium Hedge Fund Informant Recorded 125-Plus Conversations"
  17. "FBI informant recorded calls at Visium hedge fund". The Salt Lake Tribune.
  18. "Financial Times". www.ft.com.
  19. Stevenson, Alexandra (June 15, 2016). "Visium Hedge Fund Managers Charged With Insider Trading". The New York Times. Retrieved December 23, 2019.
  20. Vardi, Nathan (June 21, 2016). "Hedge Fund Manager Found Dead Of Apparent Suicide Amid Insider Trading Charges". Forbes. Retrieved December 27, 2019.
  21. Kishan, Saijel; Porzecanski, Katia; Dolmetsch, Chris (June 21, 2016). "Visium's Valvani Found Dead in Apparent Suicide Amid Charges". Bloomberg News. Retrieved December 27, 2019.
  22. Levy, Rachael (August 19, 2019). "Visium Sues Widow of Portfolio Manager Who Died by Suicide". Wall Street Journal. Retrieved December 28, 2019 – via ProQuest.
  23. Shazar, Jon (May 9, 2018). "Defunct Hedge Fund Ends Two-Year Negotiation With Feds, Allowed To Go Out Of Business". Dealbreaker. Retrieved December 24, 2019.
  24. Mullins, Brody (May 8, 2018). "Hedge Fund Visium to Pay $10 Million to Settle Insider-Trading Case". Wall Street Journal. Washington. Retrieved December 24, 2019 – via ProQuest.
  25. Krouse, Sarah; Copeland, Rob (June 17, 2016). "Visium Liquidates Fund, Sells Another to AllianceBernstein". Wall Street Journal. Retrieved December 23, 2019 – via ProQuest.

Further reading
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